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Illustration: Sarah Grillo/Axios

The American Federation of Teachers is aiming its sights on private equity, six years after issuing a report on hedge funds that led to widespread divestitures.

Why it matters: Public teacher pension funds are major investors in private equity funds. The California State Teachers' Retirement System, for example, has over $30 billion allocated to the asset class.

Driving the news: AFT and the Americans for Financial Reform Education Fund on Thursday will issue a 19-page report titled "Lifting the Curtain on Private Equity," arguing that teacher pension funds should reexamine their private equity investment strategies.

  • It's reminiscent of the 2015 hedge fund report, particularly in its analysis that private equity doesn't provide the sort of after-fee outperformance that justifies the lack of liquidity.
  • It also argues that teacher pensions should demand more fee transparency, improve their own benchmarking (risk-adjusted PME>IRR) and take into account how fund behavior impacts other unionized employees and local community economies.

Policy: AFT's report also says that pensions should: "Consider supporting federal legislation, such as the Stop Wall Street Looting Act, that would mitigate some of the investment risks associated with private equity."

  • That's the bill first introduced in 2019 by Sen. Elizabeth Warren (D-Mass.), who is quoted in AFT's press release.
  • Warren's legislation, however, isn't primarily aimed at improving private equity's financial performance (although it does include several laudable reforms). It's instead aimed at kneecapping private equity by, among other things, making buyout funds liable for leveraged financing.
  • By including this recommendation, AFT is sending something of a mixed message to its pension fiduciaries: You aren't getting enough financial performance from private equity, and you should support something that may make private equity's financial performance even worse.

In the months following AFT's 2015 hedge fund report, public pensions in such places as New Jersey, Illinois and Rhode Island made changes to their hedge fund investment practices. New York City bailed on hedge funds entirely.

  • Certain public pensions, including in California and Chicago, also took divestment actions after a 2019 AFT report on private prisons.

Reality check: Local pension trustees are fiduciaries, which means they're likely to stick with private equity if they believe their own portfolio performance is an outlier to AFT's narrative. Remember, everyone's top quartile...

The bottom line: AFT isn't telling local pension fiduciaries to exit private equity. But it sure is lighting the path.

Go deeper

By the numbers: Leaving House

Expand chart
Data: House Press Gallery; Table: Danielle Alberti/Axios

Rep. Anthony Brown (D-Md.) is the latest House lawmaker to announce he won't seek re-election next year, bringing the total number of Democratic retirements to 13, compared to nine Republicans.

Why it matters: The increasing number of Democratic retirements — put against the backdrop of President Biden's sagging approval ratings and uncertainty about redistricting — is adding to concerns the party may not be able to keep its slim majority in the House.

Ohio sues Biden admin over reversal of Trump-era abortion referral ban

Ohio Attorney General Dave Yost. Photo: Justin Merriman/Getty Images

Ohio Attorney General Dave Yost filed a lawsuit against the Biden administration Monday over a Trump-era ban on abortion referrals that President Biden overturned earlier this month.

The big picture: The lawsuit aims to reinstate two measures included in the 2019 legislation that required federally funded family planning clinics to be "financially independent of abortion clinics," and refrain from referring patients for abortions.

Oklahoma Supreme Court temporarily blocks abortion restrictions

A pro-choice activist demonstrates outside the U.S. Supreme Court on Oct. 4, 2021. Photo: Stefani Reynolds/Bloomberg via Getty Images

The Oklahoma Supreme Court on Monday temporarily blocked three abortion restrictions set to take effect on Nov. 1.

Why it matters: The laws would place new limits on medication-induced abortions and require doctors who perform abortions to attain board certification in obstetrics and gynecology.